United Kingdom

Investing in Prosperity in the United Kingdom: Skills, infrastructure and Innovation

Remarks by Angel Gurría, OECD Secretary-General, delivered at the London School of Economics Growth Commission Seminar

16th April 2013, Paris, France

(As prepared for delivery)

Lord Stern, Professor Van Reenen, Ambassadors, Ladies and Gentlemen:

It is a pleasure to have you here to discuss the key findings of the LSE Growth Commission’s report on “Investing for Prosperity in the United Kingdom: Skills, Infrastructure and Innovation.”

I welcome this valuable initiative of my dear friend Nick, not only to present and discuss the Report, but also for having taken on the task of producing this very interesting analysis along with the other Commissioners and the Institute for Government.

This discussion could not be timelier. The United Kingdom, like many OECD countries, is struggling to overcome the impact of the global financial and economic crisis. GDP growth for 2013 is projected to be around 0.9%. This is an improvement on 2012, at - 0.1%, but the outlook is expected to remain somewhat subdued.

The UK’s ability to use macroeconomic policies to revive growth is limited by a large budget deficit and near zero interest rates, although the Bank of England continues to rely on non-conventional measures. The economy needs rebalancing, away from debt-financed private consumption and public spending towards greater exports and investment. This will help to place the country on a sustainable and inclusive long-term growth path.

The Growth Commission’s report is a useful independent contribution to the UK’s efforts to develop a long-term strategy to revive growth. I hope that today’s exchange will help challenge and inform our respective work and policy recommendations. Of course, the Growth Commission’s findings are relevant not only to the UK, but also to other OECD Members.

In many respects, the reforms proposed by the Growth Commission fall in-step with many of our policy recommendations for the UK in areas such as education, innovation and the economy, including in the latest OECD Economic Survey of the United Kingdom, released in February. The UK has invaluable assets, including strong rule of law, competitive product markets, flexible labour markets, a world-class university system and science base, and top manufacturing and services firms.

However, more can be done to make the UK more innovative and competitive in world markets. Investing in human capital, innovation and infrastructure, like broadband, is essential to ensure that the United Kingdom remains a leading economy in the future.

Structural reforms, in particular, can help to unleash the economy’s full potential. These reforms should raise competitiveness, and ensure that the benefits of increased prosperity are shared more evenly across society. This is an important point, as the Gini coefficient – the measure of income inequality- in the UK (0.34), is somewhat higher than the OECD average (0.31).

The financial sector is one key area in which reforms can drive economic stability and growth. Increasing competition in retail banking will improve financing for private investment and innovation. The proposals to separate traditional banking from the securities businesses, as recommended by the Independent Commission on Banking (ICB) and the OECD, are welcome in this sense. However, it will be important to ensure effective implementation to help strengthen the health of the financial sector.

Investing in human capital is also crucial for both the UK’s economic performance and for the well-being of its citizens. We welcome the report’s perspective that children from disadvantaged backgrounds could receive a better education. This will increase their economic opportunities and contribute to the country’s performance.

Developing green technologies will also help to revive the UK’s engines of growth. The United Kingdom is at the forefront of the fight against climate change and has developed a comparative advantage in some green technologies. A continued commitment to green growth will promote sustainability nationally and globally and generate a competitive edge.

The good news is that the UK Government has already made great strides in many of these areas, including through its Plan for Growth and recent Budget announcements. Contributions from the likes of the LSE Growth Commission can only serve to support and enhance these efforts further.

Ladies and Gentlemen:

I have no doubt that today’s discussions will provide “food for thought for us all”. I’d like to begin straight away by passing the floor to the UK Ambassador to the OECD, Nick Bridge, before Lord Stern and Professor Van Reenan share the main findings of the Growth Commission’s report with us.